DoE rolls out funding package for factory retooling
Further incentives for North American switch from ICE to EV making, but likely to disproportionately benefit legacy manufacturers
The US Department of Energy (DoE) has announced a $15.5bn funding package for the retooling of existing auto factories into electric vehicle manufacturing facilities.
The funding “will retrofit existing automotive manufacturing facilities across the country, expand and retain high-paying auto manufacturing jobs, and bolster domestic supply chains”, the DoE says.
Projects eligible for funding under the scheme are those which will retrofit factories to produce BEVs, HEVs, PHEVs, as well as hydrogen fuel cell electric vehicles, from the light, medium, and heavy-duty segments.
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The package is divided into $2bn in grants and up to $10bn in loans, with an extra $3.5bn available for the expansion of battery and battery materials manufacturing, as well as grid infrastructure.
The Biden administration has passed a raft of legislation which aims to stimulate US EV manufacturing, creating a policy environment which provides incentives for consumers and automakers to invest in EVs. These include multi-billion-dollar support for a domestic battery supply chain and support for charging network buildout.
Testifying last month before the US–China Economic and Security Review Commission, Ilaria Mazzocco, senior fellow at thinktank the Center for Strategic and International Studies, spoke of the need for continued government incentives to ensure that US manufacturers can remain competitive against Chinese firms. “Automotive manufacturing continues to be an important sector for many advanced economies, including the US, and if more production were to relocate to China this could undermine domestic job creation and potentially lead to de-industrialisation," Mazzocco warns.
“Opting to slow down the transition to EVs and reduce incentives or cancel mandates for American automakers to invest in EVs would be counterproductive,” she argues. “The transition is well underway globally and the US would be even more of a laggard if it tried to reverse it domestically. Complete insulation from competition would likely also make American companies even less competitive in the long term.
“Instead, policymakers should provide more incentives to advance a diversified and competitive industry and promote innovation — in line with the IRA,” Mazzocco concludes.
But she does suggest that expecting North American firms to go it entirely alone may be unrealistic. “The current position of Chinese firms — especially in the battery segment — means that it will be extremely challenging to create affordable and competitive products in the US or elsewhere without any reliance on Chinese supply chains in the medium term,” she cautions. “In practice, this may mean welcoming some Chinese FDI into the US when it meets high standards for labour and environmental conditions and helps meet supply chain diversification goals.”
So the latest round of government funding does seem to fit these expert recommendations. But they do beg the question of whether the package will effectively act as a subsidy to the largest US legacy OEMs and other automakers making ICEs in the US, which have existing manufacturing facilities prime for conversion.
US EV pure plays that have had to build their manufacturing infrastructure from scratch may be less supportive of this help to their older rivals.